Industrial production in U.S. increases by most in three months

Industrial production rose more than forecast in February as U.S. factories turned out more business equipment and motor vehicles, showing manufacturing is helping boost the economy.

Output at factories, mines and utilities climbed 0.7%, the most in three months and exceeding the median projection in a Bloomberg survey, figures from the Federal Reserve showed today in Washington. January production was unchanged, revised from a previously reported 0.1% drop. Manufacturing, which accounts for about 75% of industrial output, advanced 0.8%, the third gain in the last four months.

Resilient consumer demand, increased capital spending and lean inventories are spurring the pace of work on assembly lines at companies such as Texas Instruments Inc. Sustained production gains will be a source of strength for the world’s largest economy that is facing the hurdle of government budget cuts.

“Manufacturing is accelerating again,” Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York, said before the report. O’Sullivan is the second-best forecaster of industrial production for the past two years, according to data compiled by Bloomberg. “This certainly suggests good momentum ahead of the sequester, and more ability to withstand whatever drag there is from the sequester.”

Another report today showed factories in the New York region expanded for a second month in March. The Federal Reserve Bank of New York’s general economic index eased to 9.2, from 10 in February. Readings greater than zero signal expansion in New York, northern New Jersey and southern Connecticut.

Economists’ Estimates

Estimates for February industrial production from the 83 economists surveyed by Bloomberg ranged from a drop of 0.1% to an increase of 1%. Utility output rose in February, while mining decreased for a third straight month.

The pickup in manufacturing, which accounts for about 12% of the economy, followed a revised 0.3% decrease in January. In December, factory output climbed 1.3% after a 1.7% jump the previous month.

The February output of motor vehicles and parts increased 3.6% after a 4.9% drop a month earlier, today’s report showed. Factory output excluding autos and parts climbed 0.6% after rising 0.1% and 1.1% in the previous two months.

General Motors Co. and Ford Motor Co. project automobile sales, on pace for the best year since 2007, will remain resilient. Cars and light trucks sold at a 15.3 million annual rate in February after 15.2 million a month earlier, according to data from Ward’s Automotive Group.